With the enactment of the Tax Cuts and Jobs Act (TCJA) on Dec. 22, 2017, substantial changes were made to the taxation of individuals, businesses, multinational enterprises, and others. While a full review of the provisions of the TCJA is not possible to provide here, below are highlights of the TCJA, generally in effect for the 2018 tax year, for shareholders of Delaware Funds® by Macquarie mutual funds.
Tax rates modified
The TCJA retains seven possible tax rates at which ordinary income is taxed (depending on income level) for individuals, with modified tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%, effective for tax years beginning in 2018.
Capital gains and qualified dividend tax rates unchanged
The current system whereby net capital gains and qualified dividends are generally subject to tax at a maximum tax rate of 20% or 15% remains in place.
Roth recharacterization eliminated
The TCJA repealed the special rule permitting recharacterization of Roth conversions, for tax years beginning after Dec. 31, 2017. For example, a conversion contribution establishing a Roth IRA during a tax year can no longer be recharacterized as a contribution to a traditional IRA (thereby unwinding the conversion).
Changes made to the alternative minimum tax (AMT)
The TCJA eliminated the corporate AMT for tax years beginning after Dec. 31, 2017.
The AMT for individuals remains, and the TCJA temporarily increased the exemption amounts and phase-out thresholds, with the modified amounts scheduled to sunset on Dec. 31, 2025.